Sensex awaits Up movement signal

The truncated week started with a bang as the Sensex surged 727 points or 3.8 per cent on Monday, the highest single-day gain in four years. Shrinking trade deficit for August at $10.9 billion buoyed sentiments. Improving sentiment in the global market with receding expectations of US-led military strike on Syria and strength in the rupee too gave the market a leg-up in the early part of the week.

Initial cheer could not, however, sustain as the market turned nervous once again as we have a series of critical events and data-point releases lined up for next week.

The FOMC meeting scheduled on September 17 and 18, which could see announcement of trimming of Fed’s bond purchases programme is likely to set medium-term trajectory for most global markets.

Our own central bank, led by the new chief, Raghuram Rajan, is set to announce its monetary policy review on Friday.

August wholesale price-based inflation data due on Monday is also a key data point to watch as it is likely to shoot up to a six-month high triggered by higher food prices and costlier fuel.

FIIs have been net buyers and prolonged their buying to a sixth consecutive session.

On Friday, the Prime Minister’s economic advisory panel announced that India’s economy is expected to grow 5.3 per cent this fiscal year, steeply lower than previous estimate of 6.4 per cent. This projection is in line with the RBI’s forecast.

Indicators and oscillators in the daily chart are featuring in the positive zone. The Sensex decisively broke through its long-term 200-day moving average on Tuesday and the Nifty too surpassed its 200-day moving average.

Oscillators in the weekly chart have crossed the mid-point indicating that the medium-term forecast is improving.

SENSEX (19,732.7)

Following a sharp jump on Tuesday, the index met key resistance at 20K mark and started to decline. For the week it has gained 462.70 points or 2.4 per cent. BSE Mid-cap and Small-cap index have zoomed 3.27 per cent and 3.1 per cent correspondingly in the previous week. The mood in the market has reasonably improved as the index has exceeded above its 200-day moving average and the 61.8 per cent retracement level of its down move from 20,351-peak. Short-term outlook has turned positive.

The index surpassed 19,500 level last week and is currently testing key resistance at the 20,000-mark. Strong move above this level can push it higher to its medium-term ceiling between 20,200 and 20,500. Further rally above its ceiling can see 20,700 and 21,000 come into play.

Inability to move beyond the 20,000-mark can pull the index down to 19,450 initially. Moreover, its 200-day moving average is poised just below this support at around 19,363. A strong fall below this long-term average can pull the index down to 18,900-19,000 band and then to 18,600. Next important support is positioned at 18,167 levels. As long as the index hovers above the 17,200 level, its long-term stance will not have any impact. A decisive fall below this level can drag the index down to 16,598 or to 15,748 levels.

NIFTY (5,850.6)

The index gained 170.2 points or 3 per cent during the week, extending its up move. Short-term trend is positive for the index. However, it is at risk as the index is testing important resistance at 5,900 level. Break through of this resistance can push the index northwards to 6,000 and then to 6,100 which is the medium-term ceiling. Next significant long-term resistance is pegged at 6,200 levels.

Failure to surpass above 5,900 can pull the index down to 5,750 or to 5,700 levels. If these levels are unsuccessful in arresting the decline, the index can move down to 5,550 or 5,338 in the medium-term.

GLOBAL CUES

The global benchmarks such as DAX, CAC, and FTSE 100 extended their rally. US markets too witnessed strong rally, Dow gained 453 points or 3 per cent to end at 15,376 and S&P 500 climbed 2 per cent to close at 1,687.9 levels.

Dow surpassed our previous week’s target of 15,300 and is heading towards 15,500 levels.

An emphatic rally above 15,500 can push the index to 15,658 or even to new highs in the ensuing weeks. Inability to exceed above 15,500 will imply the index can correct to 15,300 and lower to 15,100.

In commodities front, gold tumbled 4.6 per cent or $64.6 per ounce to settle at $1,326.2 per ounce. Silver plunged 6 per cent to end at $22.2 per ounce.

Light crude oil was choppy and declined 2 per cent to close at $108.2 a barrel. It is still its crucial resistance at $110. A strong breakout of this resistance can take it northwards to $115 in the short-term. Key supports are positioned at $106 and $103 levels.

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